The tax demand was issued on March 15. A stay has been placed on the demand, though, allowing Nokia to appeal the decision.

Nokia responded to Reuters' request for comment with a statement that "it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland." The firm said it will "defend itself vigorously."

For Nokia, India is a crucial market due to its size and emerging market base. Nokia's annual revenue in India -- its second largest market after China -- fell by nearly one-fourth in 2012.